[Federal Register Volume 88, Number 219 (Wednesday, November 15, 2023)]
[Notices]
[Pages 78410-78413]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25204]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98894; File No. SR-NYSEARCA-2023-76]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE 
Arca Options Fee Schedule

November 9, 2023.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on October 31, 2023, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to modify the NYSE Arca Options Fee Schedule 
(``Fee Schedule'') regarding certain Customer incentives. The Exchange 
proposes to implement the fee change effective November 1, 2023. The 
proposed rule change is available on the Exchange's website at 
www.nyse.com, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to amend the Fee Schedule to modify a 
qualification basis applicable to the Customer Penny Posting Credit 
Tiers, Customer Posting Credits [sic] in Non-Penny Issues, and Customer 
Incentive Program. The Exchange proposes to implement the rule change 
on November 1, 2023.
    The Fee Schedule provides for certain incentive programs through 
which an OTP Holder or OTP Firm (collectively, ``OTP Holder'') may earn 
credits on posted interest. The Customer Penny Posting Credit Tiers 
offers qualifying OTP Holders tiered credits on electronic executions 
of Customer posted interest in Penny issues, and the Customer Penny 
[sic] Posting Credit Tiers in Non-Penny Issues offers qualifying OTP 
Holders tiered credits on electronic executions of Customer posted 
interest in non-Penny issues.\4\ OTP Holders may also qualify for the 
Customer Incentive Program, which offers an additional

[[Page 78411]]

credit on Customer posting credits in Penny or non-Penny issues.\5\
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    \4\ See Fee Schedule, CUSTOMER PENNY POSTING CREDIT TIERS; 
CUSTOMER POSTING CREDIT TIERS IN NON-PENNY ISSUES.
    \5\ See Fee Schedule, CUSTOMER INCENTIVE PROGRAM.
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    Currently, an OTP Holder that achieves 0.30% of TCADV from Customer 
posted interest in all issues, not including Professional Customer 
interest, plus executed ADV of 0.60% of U.S. equity market share posted 
and executed on the NYSE Arca Equities market will qualify for the 
credits offered in Tier 4 of the Customer Penny Posting Credit Tiers, 
Tier C of the Customer Posting Credit Tiers in Non-Penny Issues, and 
the Customer Incentive Program.
    The Exchange now proposes to adjust this qualifying basis for each 
of the Customer Penny Posting Credit Tiers, Customer Posting Credits 
[sic] in Non-Penny Issues, and Customer Incentive Program to reduce the 
Customer posted interest TCADV requirement from 0.30% to 0.20% and the 
equity market ADV requirement from 0.60% to 0.50%. In other words, as 
proposed, an OTP Holder could qualify for Tier 4 of the Customer Penny 
Posting Credit Tiers, Tier C of the Customer Posting Credit Tiers in 
Non-Penny Issues, and the Customer Incentive Program by achieving at 
least 0.20% of TCADV from Customer posted interest in all issues, not 
including Professional Customer interest, plus executed ADV of 0.50% of 
U.S. equity market share posted and executed on the NYSE Arca Equities 
market.
    The Exchange does not propose any changes to the amounts of the 
credits offered in the Customer Penny Posting Credit Tiers, Customer 
Posting Credits [sic] in Non-Penny Issues, or Customer Incentive 
Program. Accordingly, OTP Holders who achieve the proposed 
qualification described above would continue to be eligible for the 
($0.47) on electronic executions of Customer posted interest in Penny 
issues through Tier 4 of the Customer Penny Posting Credit Tiers; the 
($0.97) credit applied to electronic executions of Customer posted 
interest in non-Penny issues through the Customer Posting Credits [sic] 
in Non-Penny Issues; and/or the additional ($0.03) credit on Customer 
posting credits offered in the Customer Incentive Program.
    The Exchange cannot predict with certainty whether any OTP Holders 
would seek to qualify for the Customer Penny Posting Credit Tiers, 
Customer Posting Credit Tiers in Non-Penny Issues, or Customer 
Incentive Program. However, the Exchange believes that the proposed 
change would continue to encourage OTP Holders to direct Customer 
posted interest to the Exchange by reducing the volume requirements for 
certain credits on Customer posted interest, thereby potentially making 
such credits more attainable for OTP Holders.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\6\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\7\ in particular, 
because it provides for the equitable allocation of reasonable dues, 
fees, and other charges among its members, issuers and other persons 
using its facilities and does not unfairly discriminate between 
customers, issuers, brokers or dealers.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposed Rule Change Is Reasonable
    The Exchange operates in a highly competitive market. The 
Commission has repeatedly expressed its preference for competition over 
regulatory intervention in determining prices, products, and services 
in the securities markets. In Regulation NMS, the Commission 
highlighted the importance of market forces in determining prices and 
SRO revenues and, also, recognized that current regulation of the 
market system ``has been remarkably successful in promoting market 
competition in its broader forms that are most important to investors 
and listed companies.'' \8\
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    \8\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (``Reg NMS 
Adopting Release'').
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    There are currently 17 registered options exchanges competing for 
order flow. Based on publicly-available information, and excluding 
index-based options, no single exchange has more than 16% of the market 
share of executed volume of multiply-listed equity and ETF options 
trades.\9\ Therefore, no exchange possesses significant pricing power 
in the execution of multiply-listed equity and ETF options order flow. 
More specifically, in September 2023, the Exchange had less than 12% 
market share of executed volume of multiply-listed equity and ETF 
options trades.\10\
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    \9\ The OCC publishes options and futures volume in a variety of 
formats, including daily and monthly volume by exchange, available 
here: https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics.
    \10\ Based on a compilation of OCC data for monthly volume of 
equity-based options and monthly volume of equity-based ETF options, 
see id., the Exchange's market share in equity-based options 
increased from 10.84% for the month of September 2022 to 11.48% for 
the month of September 2023.
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow, or discontinue or reduce use of certain categories of 
products, in response to fee changes. Accordingly, competitive forces 
constrain options exchange transaction fees. Stated otherwise, 
modifications to exchange transaction fees can have a direct effect on 
the ability of an exchange to compete for order flow.
    The Exchange believes that the proposed changes to the Customer 
Penny Posting Credit Tiers, Customer Posting Credit Tiers in Non-Penny 
Issues, and Customer Incentive Program are reasonable because they are 
intended to continue to incent OTP Holders to send Customer posting 
interest to the Exchange in order to earn credits on such interest. The 
Exchange also believes the proposed change is reasonable because it 
decreases certain volume requirements for the Customer Penny Posting 
Credit Tiers, Customer Posting Credit Tiers in Non-Penny Issues, and 
Customer Incentive Program, which could make credits offered in those 
programs more attainable for OTP Holders.
    To the extent the proposed rule change attracts greater volume and 
liquidity by encouraging OTP Holders to increase their options volume 
on the Exchange, the Exchange believes the proposed change would 
improve the Exchange's overall competitiveness and strengthen its 
market quality for all market participants. In the backdrop of the 
competitive environment in which the Exchange operates, the proposed 
rule change is a reasonable attempt by the Exchange to increase the 
depth of its market and improve its market share relative to its 
competitors.
The Proposed Rule Change Is an Equitable Allocation of Credits and Fees
    The Exchange believes the proposed rule change is an equitable 
allocation of its fees and credits. The proposal is based on the amount 
and type of business transacted on the Exchange, and OTP Holders can 
opt to attempt to qualify for the various Customer posting credits or 
not. Moreover, the proposal is designed to continue to incent OTP 
Holders to aggregate all Customer posting interest at the Exchange as a 
primary execution venue. To the extent that the proposed change 
attracts more opportunities for execution of Customer posted interest 
on the Exchange, this increased order flow would continue to

[[Page 78412]]

make the Exchange a more competitive venue for order execution. Thus, 
the Exchange believes the proposed rule change would improve market 
quality for all market participants on the Exchange and, as a 
consequence, attract more order flow to the Exchange thereby improving 
market-wide quality and price discovery.
The Proposed Rule Change Is Not Unfairly Discriminatory
    The Exchange believes the proposed changes are not unfairly 
discriminatory because they would apply to all similarly-situated 
market participants, and the credits offered in the Customer Penny 
Posting [sic] Tiers, Customer Posting Credit Tiers in Non-Penny Issues, 
and Customer Incentive Program would continue to be available to all 
similarly-situated market participants on an equal and non-
discriminatory basis.
    The proposed change is based on the amount and type of business 
transacted on the Exchange, and OTP Holders are not obligated to try to 
qualify for the various credits, nor are they obligated to execute 
posted interest. To the extent that the proposed change attracts more 
interest to the Exchange, particularly Customer posting interest, this 
increased order flow would continue to make the Exchange a more 
competitive venue for order execution. Thus, the Exchange believes the 
proposed rule change would improve market quality for all market 
participants on the Exchange and, as a consequence, attract more order 
flow to the Exchange thereby improving market-wide quality and price 
discovery. The resulting increased volume and liquidity would provide 
more trading opportunities and tighter spreads to all market 
participants and thus would promote just and equitable principles of 
trade, remove impediments to and perfect the mechanism of a free and 
open market and a national market system and, in general, to protect 
investors and the public interest.
    Finally, the Exchange believes that it is subject to significant 
competitive forces, as described below in the Exchange's statement 
regarding the burden on competition.
B. Self-Regulatory Organization's Statement on Burden on Competition
    In accordance with Section 6(b)(8) of the Act, the Exchange does 
not believe that the proposed rule change would impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Instead, as discussed above, the Exchange believes 
that the proposed change would encourage the submission of additional 
liquidity to a public exchange, thereby promoting market depth, price 
discovery and transparency and enhancing order execution opportunities 
for all market participants. As a result, the Exchange believes that 
the proposed change furthers the Commission's goal in adopting 
Regulation NMS of fostering integrated competition among orders, which 
promotes ``more efficient pricing of individual stocks for all types of 
orders, large and small.'' \11\
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    \11\ See Reg NMS Adopting Release, supra note 8, at 37499.
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    Intramarket Competition. The proposed change is designed to attract 
additional order flow to the Exchange, particularly Customer posted 
interest. The Exchange believes that the proposed change would continue 
to incent OTP Holders to direct Customer posting interest to the 
Exchange in order to earn the credits available through the Customer 
Penny Posting Credit Tiers, Customer Posting Credit Tiers in Non-Penny 
Issues, and Customer Incentive Program. Greater liquidity benefits all 
market participants on the Exchange and increased liquidity-posting 
order flow would increase opportunities for execution of other trading 
interest. The proposed change would apply to all similarly-situated 
market participants and, accordingly, would not impose a disparate 
burden on competition among market participants on the Exchange.
    Intermarket Competition. The Exchange operates in a highly 
competitive market in which market participants can readily favor one 
of the 17 competing option exchanges if they deem fee levels at a 
particular venue to be excessive. In such an environment, the Exchange 
must continually adjust its fees to remain competitive with other 
exchanges and to attract order flow to the Exchange. Based on publicly-
available information, and excluding index-based options, no single 
exchange has more than 16% of the market share of executed volume of 
multiply-listed equity and ETF options trades.\12\ Therefore, currently 
no exchange possesses significant pricing power in the execution of 
multiply-listed equity and ETF options order flow. More specifically, 
in September 2023, the Exchange had less than 12% market share of 
executed volume of multiply-listed equity and ETF options trades.\13\
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    \12\ The OCC publishes options and futures volume in a variety 
of formats, including daily and monthly volume by exchange, 
available here: https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics.
    \13\ Based on a compilation of OCC data for monthly volume of 
equity-based options and monthly volume of equity-based ETF options, 
see id., the Exchange's market share in equity-based options 
increased from 10.84% for the month of September 2022 to 11.48% for 
the month of September 2023.
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    The Exchange believes that the proposed rule change reflects this 
competitive environment because it modifies the Exchange's fees in a 
manner designed to continue to incent OTP Holders to direct trading to 
the Exchange, to provide liquidity and to attract order flow. To the 
extent that this purpose is achieved, all the Exchange's market 
participants should benefit from the improved market quality and 
increased opportunities for price improvement.
C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others
    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \14\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \15\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \16\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \16\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

[[Page 78413]]

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSEARCA-2023-76 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-NYSEARCA-2023-76. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NYSEARCA-2023-76 and should 
be submitted on or before December 6, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-25204 Filed 11-14-23; 8:45 am]
BILLING CODE 8011-01-P